Do the wealthy pay less taxes?

[DrSmellThis]

America's rich rise against tax
By Stephen Evans
BBC North America business correspondent

Only taxes

and death are certain - except for taxes, that is.

It won't seem that way to the millions of Americans who

file their tax returns by the deadline on Friday, but there is a mountain of evidence that tax avoidance (the legal

variety) and even tax evasion (the illegal variety) are growth industries.

Accountants in the field have even

come up with the term "tax avoision" to describe the grey areas in between. It was Leona Helmsley who said famously

that "only the little people pay taxes".

You might forgive her cynicism. The assertion was over-stated but not

completely wide of the mark.

Tax burden shifting

According to David Cay Johnston, who won a

Pulitzer Prize for his study of American taxes, there's an industry that squirrels away billions of dollars that

might otherwise head for the public purse.

"[The IRS is] like a police department that was giving out lots

of parking tickets while organized crime was running rampant".
Charles Rossotti
Former Internal Revenue

Service commissioner

Trust funds enable wealth to be passed tax-free between generations or enable income to be

disguised.

Tax-breaks for pursuits like flying in private jets help minimise the burden at the top. Entities

are created so that profits are apparently earned where taxes are low. Losses are borne where taxes are high.



On top of that, Mr Johnston, who covers taxation for the New York Times, says the tax burden has shifted downwards

through decisions by government.

Ten years ago the richest Americans paid thirty cents of each dollar of their

income in federal income tax (about the same as middle earners did).

Five years ago, that had fallen to 22

cents on the dollar.

In recent years, the trend has continued.

Tax havens

The non-partisan Tax

Policy Center calculated that half of Mr Bush's tax cuts this year will in effect go to the wealthiest 10% of

tax-payers.

Companies too are off-loading their burden.

According to the journal Tax Notes, big

corporations based in the United States increased the proportion of profit earned in low or no tax countries.



More of their profits were earned in "tax havens" than in the areas where they actually did business and where

taxes were higher.

Equitable taxation

The change has come with a big intellectual shift in recent

years.

What once seemed like a fringe argument that all taxes were a form of theft from hard-working

individuals now has political credibility, at least in America.

There are groups who oppose all income tax who

would have been shouting in the wilderness 20 years ago.

Today, they lobby in the corridors of power.

From

the Greeks through a string of eighteenth and nineteenth century philosophers, there was a sense that there should

be "equity" in the taxation of different groups.

Today, this philosophical basis for proportionately heavy

taxation on the rich compared with the poor is debatable.

The counter idea, that taxes represent an unfair

confiscation by the state, has grown along with the view that taxing the top penalises success.

Disguised

income

On a baser level, politicians have realised that attacking the tax collector is very good business

indeed.

That has made it easier to pare the resources of the Internal Revenue Service (IRS) and to brand

investigations as a form of heavy-handed pursuit of the powerless.

The former Commissioner of the IRS, Charles

Rossotti, says that the agency's enforcers end up scrutinizing ordinary tax-payers who depend on easily-tracked

wages rather than the rich who can disguise income more easily.

Mr Rossotti says in his book, Many Unhappy

Returns, that the IRS is "like a police department that was giving out lots of parking tickets while organized crime

was running rampant". He adds that it "picks on the little guy" while ''largely overlooking an ocean of money

hidden in business entities for which the owners, rather than the businesses themselves, were supposed to pay

taxes.''

Story from BBC

NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/busin

ess/4440125.stm

Published: 2005/04/13 23:00:07 GMT
© BBC MMV

[DumLuc]

Those interested in the above

topic might be interested in some of the things the Center for Economic and Social Justice has to say about

taxation.



Simplifying the tax

system to discourage government deficits and to accelerate private-sector

growth through expanded ownership and widespread distribution of profits

The CESJ has been

around for few years, but as might be expected have not made a lot of progress in their goal of redistribution of

wealth.

[Pancho1188]

The rich used to pay up to 94%

of their income in taxes when the income tax was instated. They need to switch to a flat tax and shut up about it

(sorry, H&R Block).

[DumLuc]

Here is a direct quote from the

Rate of Taxation portion of the CESJ article.


A more realistic and just tax

today would be a flat or proportionate rate imposed on all direct earned and unearned incomes above a

poverty-level income for all taxpayers. A single tax rate would be administratively more efficient than a

progressive or graduated tax. Ideally, the flat tax on individuals would cover all government expenditures each

year, including welfare, defense, interest on the Federal debt, social security obligations, unemployment and all

other current spending not covered by user fees. It could also cover the cost of health insurance premiums under

universal minimum coverage, including subsidies for the poor. This will allow for the gradual or immediate

elimination of regressive payroll taxes on workers and companies, making the economy more competitive. And it would

help make government vastly more accountable to the electorate. If tied into a vigorous national growth and expanded

ownership strategy, one could easily imagine future candidates for public office actually competing for votes on the

basis of who could offer the best government services at the lowest flat rate. Each year's single direct tax

rate could be adjusted up or down to provide sufficient revenues to avoid budget deficits.

Of course as they point out, this is only part of a solution for total

economic reform.